A trading statement from Associated British Foods, ahead of the release of half year results in mid April, predicts unchanged profitability on higher revenues from its agricultural interests.
AB Agri, ABF’s agriculture division, reports that rising sector commodity prices in the UK are expected to drive strong first half revenue growth in the first half. But reduced grain price volatility has constrained profit from grain trading at Frontier Agriculture, AB Agri’s joint venture arable marketing business with Cargill. Therefore, overall AB Agri profitability in H1 is expected to be in line with last year.
But the AB Sugar division will see lower profitability and revenues figures as low EU sugar prices affect its operations, particularly in the UK and Spain. The company notes that the end of the EU sugar regime in September 2017 removed sales quotas and export constraints. As a result, growers increased the planted area for the 2017/18 campaign, with the larger crop area exacerbated by exceptionally high beet yields. EU sugar production is substantially up on the previous year, with the EU now a net exporter of sugar. Domestic sugar prices have fallen, while more is being diverted into EU ethanol production, which means ethanol prices are also lower.
Higher beet yields and a larger crop area have led to the UK 2017/18 beet campaign producing 1.38 million tonnes of sugar, up from the 0.9m tonnes from 2016/17.
British Sugar reports a good take up of sugar beet contracts for the 2018/19 season, and says almost 60% of its grower contracts are now on a three-year agreement basis. On the sales side, the greater availability of sugar from a number of EU countries means competition for markets has been strong but the company says its sales for the year are now largely contracted.
The Vivergo wheat to bioethanol business, which is part of AB Sugar, says the pressure on ethanol prices with plentiful EU sugar feedstock available prompted it to bring forward a maintenance shutdown to coincide with the peak sugar ethanol production season.